Tuesday, February 04, 2014

How To Time Collapses

Douglas SmithZeus

[In italiano] [日本語で] Over the past half a decade I've made a
number of detailed predictions about collapse: how it is likely to
unfold, what its various manifestations are likely to be, and how it
will affect various groups and categories of people. But I have
remained purposefully vague about the timing of collapse and its
various stages, being careful to always append “give or take half a
decade” to my dire prognostications. I wasn't withholding
information or being coy; I really had no way of calculating when
collapse will happen—until five days ago, when, out of the blue, I
received the following email from Ugo
Bardi:

Starting from this post, I'm trying to draw
a parallel between the collapse of the Soviet Union and the impending
collapse of Italy. There are, as always, similarities and
differences. In particular, the Soviet Union collapsed almost
immediately after that oil production flattened out and started
declining. On the contrary, the Italian government survives despite a
loss of 36% in oil consumption.

My impression is that it is
all related to different taxation methods. I understand that the
Soviet tax system was based mainly on commodity taxes and on taxes on
production. When production stalled, people had nothing to buy and
the government had nothing to tax because most people owned nothing
and had little or no savings in banks. So, the government had no
choice but to fold over and disappear.

Instead, the Italian
system is based largely on income tax and property tax. The
government is losing revenues on commodity taxes (e.g. on gasoline)
but it can compensate with property taxes. Italians, on the average,
are “rich,” in the sense that they have savings in banks and most
of them own their homes. So, the government can tax their properties
and their savings. As long as Italians still have something taxable,
then the government will survive. It will disappear only when it has
managed to strip citizens completely of everything they have.

Do
you agree with this interpretation? (BTW, Italy as a state may be
even more culturally diverse than the old Soviet Union was.)

Ugo

I wrote back:

Hi Ugo,

Very interesting
article. Yes, the entire southern tier of the EU is in some early
stage of collapse, but so far it hadn't occurred to me to draw
parallels between it and USSR. Now that you mention it, the parallel
is obvious: it is financial collapse triggered by something having to
do with oil, but with polarities reversed, and delayed by a period of
wealth destruction.

In the case of USSR, taxation wasn't
really a source of government revenue. The national economy was based
on government ownership of everything, central planning and budgets,
and a system of assigning ministerial contracts to enterprises owned
by the ministries. The external economy was a matter of exporting
hydrocarbons in exchange for foreign currency, which was used to buy
grain—mostly feed grain for cattle, without which the population
would become protein-deprived and malnourished. Over the so-called
“stagnation” period of the 1980s the Soviet economy became
hollowed out because of several trends. Too much spending on defense
was one of them. Another was that investment in capital goods
(machinery, plant and equipment) reached the point of diminishing
returns, which is very difficult to characterize but not so difficult
to observe. Lastly, Solzhenitsyn and the dissident movement had done
irreparable damage to Soviet prestige, destroying morale. The coup
de grace, when it came, consisted of two pieces. One was the
inability to expand oil production given the state of Soviet oil
extraction technology of the era. The other was the fall in oil
prices, down to $10/bbl at one point, because North Sea and Alaska
both went on stream, and the Saudis pumped as much oil as they could
based on a tacit agreement with the US to depress oil prices and thus
crush the Soviets. In this they largely succeeded. The USSR became
heavily indebted to the West, and, at the very end, needed Western
credit to keep the lights on in the Kremlin. One of the final scenes
featured Gorbachev on the phone with [West Germany's Chancellor]
Helmut Kohl asking him to ask the Americans to release some funds.

Now, I can see parallels to this in
what is happening now in the US and in the EU, but with all the
polarities reversed: here oil flows in and money flows out, and the
coup de grace [will be] high oil prices rather than low.
Instead of failures of central planning, which failed to allocate
production effectively, we have failures of the globalized market,
where production is effectively globalized but consumption is
ineffectively localized among the wealthy and the formerly wealthy,
and has to be fueled by credit. Instead of diminishing returns from
deployment of capital goods, we have diminishing returns from
deployment of capital itself, where a unit of new debt now produces
much less than a unit of economic growth. The damage to reputation
and morale is mostly on the US side of the Atlantic, where in place
of Solzhenitsyn and the dissident movement we have Abu Ghraib
[scandal], [Wikileaks' Julian] Assange and [Edward] Snowden. With the
EU, most of the damage has to do with [the] experience of economic
disparities between the rich core and the increasingly impoverished
periphery, and the recent move in Ukraine to walk away from the EU,
and the ensuing Western-financed mayhem in Kiev, show that the bloom
is off the EU rose as well. The runaway military spending is likewise
mostly a US issue, although epic failures in Afghanistan, Libya and
Syria, in which the EU is complicit, are likely to have some effect
as well.

Comparing USSR to Italy is difficult
because of the disparity of scale: 1/5 of the planet's dry surface
versus a smallish peninsula; an economy that slowly decayed in
isolation versus an integral part of the EU; a country where the
choice is between burning hydrocarbons or dying of exposure versus
one where the choice is between riding a scooter or taking the bus; a
country with a ravaged agricultural sector unable to grow enough
protein calories versus a nation of foodies where corner groceries
make worthy subjects for oil paintings. But I think that when it
comes to the actual collapse, when it finally comes, there will still
be identifiable similarities. Financial collapse always comes first:
all sorts of financial arrangements unravel as the center becomes
unable to float the periphery, and in response the periphery starts
to withhold economic cooperation. The result is a breakdown in supply
chains, shutdown of production, and, shortly thereafter, shutdown of
commerce. In the case of the USSR, this unfolded in 1989-91 as the
various republics and regions refused to cooperate with Moscow. I
suspect that this will also happen in the EU, at some
point. But I think that you are exactly right that whereas the
average Soviet citizen could not be fleeced, Italy, and much of the
EU, still have plenty of fat sheep that the government can shear to
keep things running. Thus we are looking at a few more years of
steady decline before the lights start going out. This, then, is the
key distinction: the USSR collapsed promptly because it was already
skin and bones, whereas the US and the EU still have plenty of
subcutaneous fat to burn through. But they are, in fact, burning
through it. And so, the conclusion is, collapse will come, but here
it will take a little longer.

-Dmitry

Ugo responded:

I agree with you, of course. It makes
perfect sense to me and it is the main point I was making: the Soviet
government couldn't tax Soviet citizens too much because they owned
very little.

...

The Italian government instead has
some luck in the sense that Italians have some savings and most of
them own their homes. So, the government is progressively strangling
their citizens to squeeze out of them all that they have—while they
still have something.

The last round of tax increases in Italy
is targeting homes and it is really, really hurting, especially the
poor. You can be poor here, and still own a house that you inherited
from your parents. Now the government asks you to pay as if that
house were revenue! That is truly evil. People who don't have the
money to pay this property tax can only indebt themselves with banks
(or worse). Eventually, they'll have to sell their homes or give them
to the bank (or to the Mafia)—the result is disaster for everybody,
including for the banks, and even the government. But the whole thing
has a perverse logic. It has the advantage that it generates some
immediate cash which is badly needed, then the hell with the
future.

The [next] phase will be to target bank accounts.
Then, when there will be nothing left, the government will decamp and
say bye to everybody. Hell, what a planet I landed in.....

All
the best,

Ugo

And so here is the outline of the
method for calculating the timing of collapses:

1. Find out when the collapse clock
starts running by looking for a significant drop in energy
consumption

2. Calculate how long the clock is
going to run by dividing the total wealth of the citizenry by the
economic shortfall of the shrinking economy

For any industrial economy the collapse
clock starts running as soon as the consumption of fossil
hydrocarbons starts dropping appreciably. It is sometimes difficult
to tell whether this has already happened if the country in question
is still a major hydrocarbon producer. Gross production numbers can
still be holding steady or even seem to go up a bit, but once you
subtract all the energy that is being expended on energy production
itself, and on the unprofitable mitigation of its many undesirable consequences,
you might be able see a decline sooner rather than later. Notably,
the net energy yield, or EROEI, is very low for all the newer
unconventional sources that have been trumpeted as panaceas in recent
years, such as ones that require hydrofracturing and drilling in deep
water, tar sands and so on. (The so-called “renewables,” such as
wind, solar and biofuels, are an even bigger joke, because all of
them with the exception of hydroelectric plants have net energy that
is too low to sustain an industrial economy, plus they all depend on
technologies that are “nonrenewable” unless the country maintains
a vast industrial base which happens to run on fossil fuels.) And so
the drop in net energy consumption is clear for Italy, which produces
7% of the oil it consumes and imports the rest, whereas the picture
is somewhat less clear for the US, which still manages to supply
around a third of its oil.

Since all industrial economies
literally run on fossil fuels, lower energy consumption immediately
translates into a lower level of economic activity and a shrinking
economy. The gap between the expectations of economic growth
that are dialed into all of the financial arrangements, and the
reality of economic decline driven by lower energy availability, has
to be plugged with the population's savings. There are a number of
ways of expropriating wealth, generally proceeding from various kinds
of stealth taxation measures, to more overt measures, to outright
expropriation. Taking the US as the example (since I am most familiar
with it) the expropriation cascade is proceeding as follows:

1. Central bank policy of zeroing out
of interest rates on savings combined with massive money-printing.
This forces money into speculative markets (stocks, real estate,
etc.) creating huge financial bubbles; when these bubbles pop, savings are said to be destroyed, but in reality that money
has already been spent by the government or used to fill the private
coffers of those closely associated with the government.

2. Government policy of canceling
retirements or short-changing retirees. The federal government has
worked hard to make its official measure of inflation all but
meaningless so that it can justify its policy of making cost of
living adjustments to social security payments that are far less than
the the real increases in the cost of living. Another federal
expropriation scheme is via guaranteed student loans, which cannot be
discharged through bankruptcy, and which have created an entire class
of indentured servants. At the more local level, state and municipal
governments are curtailing or canceling retirement programs by virtue
of going bankrupt.

3. Ever more onerous reporting
requirements for financial transactions, especially for those who try
to leave the country and expatriate their savings. All foreign bank
accounts must now be reported, and people who work abroad are now
forced to file voluminous annual reports that cost thousands of
dollars to prepare. Those who decide to repudiate their US
citizenship are made to pay a hefty exit tax. Nevertheless, record
numbers of US citizens have been doing just that. Just having a US
passport often makes it impossible to set up accounts in foreign
financial institutions, which have little desire to comply with US
demands for financial disclosure.

These are the measures that are already
in place. Looking at what's been tried before, here and elsewhere, we
can see what other measures are in the works. Among them:

1. So-called “bail-ins” where
insolvent financial institutions are rescued by confiscating
depositor funds. We can expect the script to be similar to what
happened in Cyprus: politically connected depositors get word ahead
of time and yank out their money forthwith; everybody else gets
shorn.

2. Limits on bank withdrawals. You
might still “have” money in the bank, but that's the only place
you can “have” it. The semantics of the verb “to have” can be
quite tricky, you see...

3. Ever-increasing taxes on property
resulting in property confiscation. It works like this: government
prints money and hands it out to its friends; its friends use it to
temporarily bid up property values; property taxes go up to a point
where the property owners can't pay them; owners lose their
properties. A staggering 63% of real estate purchases in Florida last December were
cash purchases.

4. Various kinds of sudden, new,
super-complex regulations, noncompliance with which results in very
large fines. In turn, nonpayment of these fines results in forfeiture
of assets. The US has some very curious laws according to which
inanimate objects such as cars, boats and houses can be charged with a crime,
seized and auctioned off. We can expect lots more of such property
grabs in the future.

5. Gold confiscation, which happened
once in the US already, so there is a precedent for it. Yes, I know
that this will make a number of people upset, but I am yet to hear a
convincing argument for why the US government would not resort
to gold confiscation when that turns out to be one of the few remaining
cards it can play.

This list is by no means comprehensive. If you feel that I have missed something major, please submit a comment, and I will consider it for inclusion.

Now, it would be nice if all of these
measures worked like clockwork, always producing the right amount of
wealth confiscation to levitate the government, and the financial
scheme on which it is based, for a little while longer. Alas, as with
most things, something is bound to go wrong at some point, most
likely when you least expect it. And it seems like a dead
certainty that something will in fact go wrong well before every last
American citizen is relieved of every bit of their accumulated wealth
and is living peacefully in a roadside ditch, wearing an attractive loincloth and a stylish mudpack for a hat, quietly perfecting a nouvelle cuisine that features snails au jus and dandelion salad au chaume. Maybe you can imagine it, but I can't. Beyond a certain point, I can only imagine reports of widespread “public disturbances” followed by “breakdown of law and order.”

Still, I hope that this framework will
allow us to set an upper bound for how
long collapse can be deferred for any given country. Once hydrocarbon
consumption drops appreciably, the clock starts running. Then it is
possible to estimate how long the clock can theoretically run by
dividing the remaining net worth of the population by the size of the hole in
the economy created by falling energy consumption.

But after that things get messy. Some
countries will hollow themselves out quite peaceably, and go softly
into the night, while others will explode and fast-forward though the
financial-commercial-political collapse sequence. And so perhaps the
most useful thing to know is whether the collapse clock is already
running for any given country, because if it is already running, then it becomes a
fool's game to wait around for the inevitable outcome.

One reasonable approach is to get
another passport and quietly relocate to another country. It is
important that this country be one for which the collapse clock is
not running and won't be for a long time yet. Ideally this would be a
financially secure, politically stable, energy independent,
militarily invincible, underpopulated, non-extradition country which
will be among the last to be severely disrupted by climate change and
where you could have lunch with Edward Snowden. But this approach
doesn't appeal to everyone, and I understand that.

And so another approach is to adapt to
what's coming while remaining in the US, or in any other country for
which the collapse clock is running, by making yourself, and your
wealth, should you have any, illegible. Here is a very
nice article by one smart cookie by the name of Venkatesh Rao on the
concept of illegibility. And here
is his very nice primer on being an illegible person. This kind
of illegibility has nothing to do with bad handwriting; it is about
hiding in plain sight. Please read these as homework, because I will
have more to say on this topic in the near future. And I would love
to see a list of countries for which the collapse clock is running,
along with first-order estimates for how long it could possibly run
for each one, based on their population's net worth and the country's
economic shortfall. But since this post has just gone over 3000
words, I am leaving this as an exercise for the reader.

27 comments
:

I read the 5 stages and it was excellent. I borrowed it from the library, cause I'm unemployed and frugal. I had to wait 2 months as there were 21 other frugal people ahead of me. I'm curious as to your thoughts on how basic infrastructure (roads, rail, bridges, etc) will effect the future and what role, if any, did it play in the collapse of the USSR?

Another metric (and response) to consider is the number of people making other arrangements, pre-collapse. This article is of particular interest to me since I spent the summer of 1974 studying in the USSR, mainly Moscow and 'Leningrad' (short visit to Kiev), after a couple of weeks in Italy, Austria and Hungary.

Of course, in 'free Europe', all of the stores were open and well stocked. Once in Russia, obtaining goods generally meant putting on my best jeans and walking through the nearest park. The 'free' (black) marketers would show up in due time, offering all sorts of bargains that were simply not available in the state-owned stores. Trade, barter, or foreign currency were all gladly considered. I wore a pair of tennis shorts under my jeans, just in case I needed to get back to the hotel without my pants. The alternative economy was thriving at the same time that folks were queueing up for a bit of fresh chicken at the state store.

It's not only the wealthy who bypass or exit the formal economy when the formal economy isn't serving the interests of the population. Indeed, many folks decide early on that it isn't in their best interest to continue to service the formal economy.

I suppose it gets to be a chicken/egg argument: Do folks make other arrangements because main stream economics is failing them, or do economies fail because an increasing number of consumers are failing to willingly support the official economy? Either way, it's a death spiral for business as usual. I'm getting a lot of informal bids for my services since 2008.

Anyone want to trade a good goat for some used PV equipment, let me know.

Outright confiscation of real estate is less lucrative than it seems at first glance, given as buyers for the stolen homes will not materialize out of thin air. (Bureaucrats occasionally expropriate lands for their personal pleasure, but this is not the usual scenario.)

Confiscation of cash (whether by turning paid-up home owners into de-facto renters via ruinous taxation, or by levying bank accounts) will remain an attractive proposition while the resulting plunder continues to have some buying power.

Everybody's favourite: forcible confiscation of gold - may be avoidable, but only for the simple reason that desperate people are certain to willingly trade their gold (diamonds, bitcoin, spare organs, you pick) for so much as a promise of food, security, safe passage to some far-away place, etc.

I've been noting for a while that transition people or peak oil folks need to educate themselves about their local technologies of expropriation. Because if they turn out to be right about what turns out to have value in the future, they often don't seem particularly well equipped to hang on to that once the future gets here. I don't mean roaming mobs, though such things happen. You're much more likely to be relieved of your property by your town council. All I would add to your list would be to encourage people to take an anthropological look at how their local unpopular minorities are kept under the thumb of the powers that be. There you'll find a toolkit for popular injustice and guerrilla economic warfare that should give you a sense of how you'll be treated as you make the transition from comfortably poor to destitute. And by all means, get yourself a voice on the town council, if they're still cheap where you live.

I do not disagree with your analysis of collapse timing. But I will offer an alternate outcome for US that depends upon greater cooperation, education, organization and restraint than we are probably capable of.

The solution depends upon understanding that it is not quantitative easing per se that hastens our demise. It is as you say, diversion of hastily printed $ into ponzi 'skillsets' that add nothing to our cultural resilience and transition socio-economic structures.

Consider that loss of cheap energy is the catalyst of this collapse. That energy embodied in money is draining off. Thus, more money is needed. If we must work 10x harder to sustain ourselves without oil then don't we need 10X the money supply? This only seems inflationary because the increased money supply is not directed at a program of transition: educating on and reverse developing for gradual transition to localized closed loop energy and subsistence technologies. In short, we are all resource managers now.

The rub, again, is that it is so difficult to maintain social cohesion while everyone is in different stages of accepting collapse: raging, grieving bargaining...

It is the only 'civilized' way out. Thus we will most likely be revealed for the horrible infants we are, savage beings, pretending nationhood while engaging in extreme ego gratification. The potency oil bestowed, we misused. It might have been used as a step upwards towards more concious progress. Adversity may yet be such an opportunity, but the odds do not look good.

I think here in Britain the alarm on the collapse clock has already chimed, it's just that the sound has been drowned out by people hysterically mimicking the noises coming from across the Atlantic ocean. Btw I fancy opting for the Orlov option of a flat bottomed boat, except in my case it will be a canal barge.

It's currently kind of tricky to make a living as a migrant, unless one is content with parasitic jobs, and the rent is high, which doesn't help anything much. Most nomadic cultures did not couch surf.

Get back to me in about a hundred years, there will be plenty of migrant farm jobs available, which is a useful occupation. They exist now, of course, but in _relatively_ small numbers. Once we've run through all the chemicals and liquid fuel, farm work will be much more labour intensive again, but still seasonal. Workers will move with the seasons, planting in the spring, harvesting in the fall.

Interesting. Here in Finland, one of EU's supposedly safe core countries, total energy consumption peaked in 2006 and fossil fuel consumption in 2003. Finnish households also happen to be among the poorest in the euro area when measured in net worth, probably due to high taxes, relatively low purchasing power and the welfare state (no need to save money). Of course Finnish households tend to be small but this can hardly be seen as a good thing when it comes to resilience. I wonder how much time we have left. (ECB's study on European households' net worth can be found at http://www.ecb.europa.eu/pub/pdf/other/ecbsp2en.pdf.)

My first posting but I am regular reader and have both your books plus a fan . I lived in Hungary from 1992 thru 2009 .From the boom to the bust .Some observations :1. As Ugo says nothing to tax .Exactly the same in Hungary .Payroll taxes are about now 50% and cannot go up further .2.Property tax increase just as you described . The property prices in Budapest have fallen by over 50%(taxes up by 50%)and the there are no buyers and no renters .The market is dead . Hungary does not need to build industrial or warehousing buildings for the next 20 years . The problem is that persons(workers) who received properties in compensation for their dues for getting fired in the the privatization of early 90'S are now unable to pay the property taxes on these property .The rent from these use to help them survive along with the meagre pension,but now no rent and astronomical property taxes have killed them .I was in Budapest in July 2013 and was astonished to see the sign "Property acquired by Budapest municipality due to failure of tax payment".I very much agree with both Ugo and you that the govt is going to skin till you are dead .Both of you hit the bull's eye on this833

I think timing a U.S. collapse is a bit more difficult than you present. As hydrocarbon costs increase in the U.S. the American people will have to be squeezed to make up the difference and when they can’t be squeezed any more the party gets raided and the orders come down to turn off the music and everyone go home. That there is nowhere to go is irrelevant and that defines collapse. To postpone collapse different countries can be squeezed in different ways to make up for the loss of fossil fuels and the picture gets complicated. I think the idea needs to be restated in simpler terms before returning to the U.S. question.

Cheap fossil fuels feed an economy like food feeds an animal. With cheap fossil fuels gone a countries economy like any animal will starve. But an animal can keep going for a while by living off fat cells. In the American economy the citizens are the fat cells and the American Body will deplete its citizens of nutrition and only when it as finished doing so will it die. By figuring out how long it will take for the American economic body to use up its fat cells collapse can be timed.

The American situation is complicated as we are not a homogeneous society. We are diverse. Essentially America is a country composed of many different kinds of fat cells. Some kinds of our fat cell citizens are already used up. The poor have already been pretty much depleted with some ethnicities suffering more than others. To them America has already collapsed. But currently they are subsidized by middle class fat cells which are now being used up but who still have a nutrition remaining. Collapse can’t happen until the affluent fat cells actually feel the pinch and that has not happened yet. America has a lot of those kinds of cells. As those cells control media they can keep the American animal standing up for quite a while through deception. Most other fat cells will already be dead and the American animal will from outside appearances continue to look healthy until affluent fat cells begin to be consumed. Only then will the American animal begin to shake and twitch.

When the affluent fat cells have robbed all the other fat cells of nutrition then and only then will it be possible to time an American collapse.

Hi Dmitry (and Kollapsniks) - do you think that moving into crypto-currencies (ie. bitcoin, etc.) would be a smart idea to avoid government interference (short-term), or do you think since they depend on a pervasive, functional internet and thus require high energy inputs that they are essentially useless (long-term). Thanks.

Great article. I believe that you are correct about the USA. It will go fast. Something will go wrong somewhere. USA operates on a complicated system. One little thing goes wrong somewhere and the whole enchilada will fall. On another note have you heard of this fellow in Moab Utah named Daniel Suelo? He gave up money 12 years ago.http://youtu.be/EvU46JpFlXw

Thank you Dmitry and Ugo for a great collaboration with some good take home inklings. Scary thing about the pieces of the puzzle coming together is that it signifies that the world is in the flux of a changing transition state where the true state of affairs are crystalizing (or vapourizing) for all to see . . . and when a threshold number start to see . . . then the world is suddenly a different place for everyone.

According to Saddletramp's latest, the two weeks the 10 year note spent over 3% broke the derivatives markets, triggering massive margins calls which is what you see playing out in the so-called emerging markets. He is a former banker with a friend at the Dallas Fed. Definitely worth your time.

Re: "1. Find out when the collapse clock starts running by looking for a significant drop in energy consumption."

According to the EIA, US Oil Consumption has been on a almost steady decline since 2005(when it peaked) at 20,802,1615.

US Oil usage went down to 18, 771,4000 in 2009, ticked up again to 19,180,126 and has since declined to 18,490,2136 in 2012.

There have been other drops in US Oil consumption from 1980 to 1983 and from 1989 to 1991, after each previous drop the consumption rate soon reverted to an upward trend. The bounce back from the drop in consumption in 2005 to 2009 was short lived and the decline in usage has sunk further than the 2009 drop.

A more cornucopian view at RealClearEnergydotOrg is found article in November of 2013 titled "U.S. Oil Consumption Falls Off Cliff"

They cited three reasons for this decline, better gas mileage, and more use of natural gas in heating and transportation. This is whistling past the grave yard in my opinion. The increase in the production and use of NatGas has been mostly at the expense of the use of coal and not petroleum. 95% of transportation fuels is petroleum based.

In yet another semi cornucopian article touting the glories of NatGas and the glories of fracking Earth magazine recently wrote that"As has been the case since 1950, petroleum was the most-consumed fuel in 2011, at 35.3 quads. Use of petroleum, which includes crude oil as well as natural gas plant liquids, has fallen recently from its peak historical level of 40.4 quads in 2005. Natural gas, which had been consumed in roughly equal amounts to coal for several years, accounts for almost 25 quads compared to coal's 20 quads in 2011. Natural gas and renewable energy were the only fuel sources whose consumption increased in 2011."

According to the US EIA as of 2011 the US used 5.1 less quads of petroleum than in 2005. While not all of this was for transportation, the vast majority f it was. The use of NatGas for transportation went from 23 billion cubic feet in 2005 to 30 in 2011, to an average of 33 in 2013 (http://www.eia.gov/totalenergy/data/monthly/pdf/sec4_5.pdf)

To reiterate, in 2011 the US used about 10 Billion more cubic feet of NatGas for transportation while using 4.1 quads of BTU less oil. To offset 4.1 quads of BTU the US would have had to use about 4 Trillion more cubic feet of NatGas as 1 trillion (1,000,000,000,000) cubic feet (1Tcf) = 1.027 quadrillion Btu. Which means that NatGas accounts for only 0.0025 of the quads of BTU that have not been used.

In an economic system based on growth, one where the use of oil would be increasing, the use of new technologies, renewable and NatGas, does not explain a drop in consumption of almost 2.5 million barrels of oil a day since 2005.

Under 'methods of wealth confiscation' I'd suggest the accelerating seizures of the commons, by the government (which is itself, theoretically, a kind of 'commons') and via 'privatization' (which is most definitely not).

As access to commons, whether forest, resources, media or legal is removed or becomes unaffordable, illegibility becomes more and more a challenge.

As more Americans have used up their "fat cells" (savings, assets, still-operational vehicles, etc.) they are disappearing from the conventional economy. Where do the long term unemployed go when they have given up on any future job - to the underground economy, by default. They have already downsized their consumption to the bare minimum, now they are moving in with parents and relatives and doing work trades as a substitute for income. Or entering a new "industry" like pot growing or elder care. They will ride bicycles or walk, stop purchasing much of anything and their tax bills will shrink to the point that Government can no longer function.

So, yeah, look for a future of increasing property taxes, confiscation and foreclosures to keep the BAU afloat.

So much for the vision of a relatively cozy post-collapse world based on permaculture homesteads. Much of my equanimity in the face of decline of the current model has been based on owning a piece of land, free and clear as they say. I feel too old to change course now, and shall focus on raising chickens and vegetables anyway. But, thanks for the alert.

As a resident of Pennsylvania I am acutely conscious of this whole idea of EROEI as it regards hydro-fracturing in my state. Aside from the endless horror stories of well explosions and water contamination - and now regular tar sands train derailments, most recently Pittsburgh and Philly - there have been stories in the papers here recently about drilling lease "discrepancies".

It seems many members of the public (aka the suckers) have been calling the state to complain that their royalty checks are no where near what they were promised they'd be becasue the drillers (mostly Chesapeake) have been deducting certain production costs from the royalties prior to payment...in some cases the checks have negative net value.

It may be in the standard lease fine print as to how much of this is legal and the Governor is now fighting a PR war to "get to the bottom of things" while imploring the industry not to "ruin their good reputation" with Harrisburg. Even the State Attorney General is investigating the claims. One big question that has flown completely below the media's radar on this story though is that if drilling lease checks are actually in net negative territory then wouldn't that mean that even current Marcellus production is operating at a loss?

How is shale gas the panacea for either energy consumers or capital investors in energy companies if we are already operating at a financial loss this quickly into the play...hmmm?

On Japan, the situation is complicated. I have not been able to find much data on the country's use of fossil fuels beyond what is widely known: after Fukushima, its fossil fuel consumption necessarily rose. The government is desperate to get it down again, so they are disregarding their own citizens' opposition to nuclear energy. Nevertheless, all of the nuclear reactors are shut down at this time. In addition, the government keeps trying to kickstart the economy by subsidizing business, so fuel consumption is rising.If we talk about personal consumption, again it is complicated. Cars and gasoline have always been highly taxed luxury items, and public transportation is widely available. In recent years, younger people simply have no money for cars. There is probably some decrease there, but I have no figures. The older generation has not been forced to cut back driving yet.Confiscation of assets, on the other hand, has been going on for quite a while. In the 30 years I've been here, interest on savings has been essentially zero, yet people have huge savings and would feel very insecure without them. Their money mostly goes into government bonds, either directly or via their banks. That, famously, is what has kept the country from collapsing so far. The consumption tax will increase next month to 8%. The government has succeeded in decreasing the value of the yen by about 20% over the past year, another means of confiscation.Several years ago, a government employee "accidentally" shredded records of pension premium payments. My husband lost about 40% of his. That's never been rectified, and everyone knows why: the government doesn't have the money. This, the TEPCO scandals, and the new secrecy act have caused some loss of credibility to the government, but nowhere near the disappointment and anger we see in America.The Japanese do run out of patience and riot. It's happened historically, but it takes a lot. So, to sum up, the tipping point has clearly been reached; the question of when is hard to answer and probably irrelevant. We might be able to calculate how much fat there is for the government to go through and the rate of its use. I imagine a catastrophic loss of savings at some point. They are trying to avoid that because it would likely cause a total loss of confidence in the system. They'll keep raising taxes, because the people accept it stoically.

Trying to guess the timing of economic collapse in the US may not be as simple as applying a formula based on collapses of other countries. The US has a tribute economy as the dominating empire in the world, so we get to burn through the wealth of other nations before we even have to touch the wealth of our own people (the wealthiest of us anyway). Unfortunately, the poor and middle classes have no way to protect their wealth, so for many of us the US will become a third world country long before the collapse.